New Maryland Foreclosure Process

The continued surge of foreclosures in Maryland has brought about new legislation. This will delay residential foreclosures and is an attempt to reduce the mortgage fraud in the market.

New Maryland Foreclosure Process
Governor O'Malley Signs Emergency Legislation to Protect Homeownership

Foreclosure Law Summary

SB 216/HB 365 – Foreclosure Process

Requires a mortgage or other security instrument on residential property to contain the license number of a mortgage originator or mortgage lender.
This provision would allow regulators to track which mortgage providers have the highest foreclosure and default rates.

Prohibits filing an action to foreclose on residential property until the later of:
90 days after default
45 days after the “Notice of Intent to Foreclose” (Notice) is sent

Prohibits the foreclosure sale from taking place sooner than 45 days after the service of process containing the Notice. This means that a foreclosure sale could not occur sooner than 135 days after default.

Requires the Notice to be sent to the mortgagor and record owner at least 45 days before filing an action to foreclose.

Requires the Notice to include information regarding the security instrument, including the debt due, the rights of the individual facing foreclosure (including the right to seek housing counseling or consult with a real estate licensee). The Notice encourages the person in default to act quickly.

Gives the person in default the ability to cure the default by paying all past due amounts and reinstate the loan up to 1 business day before the foreclosure sale.

This act is an emergency measure which takes effect April 3, 2008.

SB 217/HB 360 – Mortgage Fraud Protection

Allows the seizure of any property used in connection with mortgage fraud or gained through mortgage fraud.

Establishes certain defenses against forfeiture for innocent owners, tenants, and property used as a principal residence.

Defines mortgage fraud as any person intending to defraud by:
knowingly making misstatements, misrepresentations, or omissions during the mortgage lending process knowingly using any deliberate misstatements etc. receiving funds from a mortgage closing that resulted from fraud filing in the land records any document that the person knows to contain deliberate misstatements etc.

Establishes criminal and civil penalties, including criminal penalties of up to $100,000 or imprisonment up to 20 years for a person engaged in a pattern of mortgage fraud. Establishes criminal penalties of up to $5,000 or imprisonment of up to 10 years for a single violation.

This act is an emergency measure which takes effect April 3, 2008.

SB 218/HB 361 – Prohibition on Certain Foreclosure Transactions

Establishes requirements for a foreclosure consultant

Requires a foreclosure consulting contract to include a notice that the foreclosure consultant must provide the homeowner with written copies of information regarding the value of the homeowner’s property, including comparables or appraisals.

In addition to duties already prescribed under law, this bill adds additional requirements for foreclosure consultants, including:

Giving a homeowner a notice containing information regarding the financial details of the deal, the right to rescind the contract, and other information.

Limiting the amount of commission a foreclosure consultant can make to 8% or less of the sales price

Prohibiting the consultant from holding money in escrow or on a contingency basis on behalf of the homeowner

Mandating a foreclosure consultant engaged in real estate activity to hold a real estate license

Imposing a duty, similar to the fiduciary duties of real estate agents, on foreclosure consultants not engaged directly in real estate transactions
Requires a “Notice to Homeowner” to be included in any foreclosure contract that sells the property, and that also gives the homeowner a 5 day rescission period of the real estate contract. The notice is basically the same notice required under current law.

Establishes that a real estate licensee is NOT a foreclosure consultant as long as the licensee is:

Engaged in an activity for which they are licensed
D
oes not engage in prohibited foreclosure consulting activities

And, if working with a property in default, that the property in default is listed in the MLS, and is transferred through a settlement

Gives a homeowner whose property has been in default for more than 60 days, a 5 day rescission period after entering into a contract to the sell the property.

Prohibits purchasers of residences that have been in default for more than 60 days, from certain activities, including:

Representing that the purchaser is acting as an advisor or consultant on behalf of the homeowner

Representing that the purchaser has licensing or accreditation that the purchaser does not have

Representing that the purchaser is assisting the homeowner to “save the house” or substantially similar phrasing

Representing that the purchaser is assisting the homeowner in preventing a foreclosure if the result of the transaction is that the homeowner will no longer own the property

Making any false, deceptive or misleading statements regarding the value of the home or the amount of the proceeds the homeowner will realize

Recording any document before expiration of the 5 day rescission period

Requires purchasers to give a “State of Tenancy” if a tenancy agreement is included in the sale of contract for a residence in default.

This act is an emergency measure which takes effect April 3, 2008.